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206 IRET Congressional Advisory 1 (2006)

handle is hein.taxfoundation/iretcgadv0203 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies thait will promote growth and efficient operation of the market economy. June 23, 2006 Advisory No. 206 SPENDING RESTRAINT MEASURES BEFORE THE SENATE The House has passed a reformed version of the line item veto sponsored by Representative Paul Ryan (R-WI). It would allow the President to send the Congress a request that specific spending items and narrowly-targeted tax measures in a newly- enacted law be reconsidered. The President's request would have to be submitted within 45 days of enactment. He would be allowed 5 lists of rescissions for an ordinary bill, and 10 lists for an omnibus appropriation or reconciliation budget bill. The Congress would have to vote on the request, without amendment, within 14 legislative days. The measure now goes to the Senate, which should give it serious consideration. A previous version of the line item veto was struck down by the Supreme Court in 1998 because it took too much legislative authority away from the Congress. In that version, the President could rescind a portion of an appropriation, and the money would not be spent unless Congress acted to restore the spending. The new measure is expected to pass Court scrutiny because Congressional action will decide the outcome. The line item veto is aimed mainly at controlling wasteful spending, especially non-cost-effective earmarks that have proliferated in recent years. It may also be used to curb special-interest tax preferences. Such targeted spending items and preferences are often inserted as minor items in large spending or tax measures whose over-all necessity or popularity makes it impractical for a Member of Congress to vote against it, and makes a Presidential veto of the entire bill futile. This version of the line item veto forces a re-vote on such items without their protective cover, one-by-one or in small groups, which makes them much less likely to be re- approved. Trimming wasteful earmarks is a useful step in bringing some restraint to Federal spending, but it can only do so much. Another measure before the Senate would restore some control over total budget outlays. Senator Judd Gregg (R-NH) has proposed a new version of the old PAYGO rule. Under the old PAYGO rule in the 1990s, discretionary spending hikes had to be offset by tax increases or discretionary spending cuts. Entitlement increases or tax reductions required offsetting entitlement cuts or increases in other taxes. These rules blocked efforts to reduce tax barriers to growth. The new version would cap discretionary spending growth, and would mandate that overages be offset by an across-the-board spending reduction. It would build a certain amount of emergency spending into the cap, but would end the open-ended emergency spending loophole that plagues the current budget rules. It would set targets for the deficit to decline as a share of GDP to achieve virtual balance by 2012. Congress would be required to trim spending to meet these deficit targets; failure to due so would trigger across the board cuts in entitlements. Tax increases would not be required. This formulation would clearly be more effective than the old PAYGO system in trimming the size of government, not just the deficit. There would also be a line-item veto/expedited rescission provision. The bill would establish two km A * I I6~ 8 ~gg

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